Analysis of Contemporary Accounting Issues: The Burney Madoff Scandal

This research proposal delves into the contemporary accounting issues surrounding the Burney Madoff scandal, one of the largest Ponzi schemes in history. The report explores the practical and theoretical motivations behind the study, highlighting the impact of the scandal on corporate governance, investors, and accountants. It examines the theoretical frameworks related to auditor misrepresentation and the company's unethical practices. The literature review analyzes key aspects of the scandal, including the 'too good to be true' investment offers, the Ponzi scheme structure, and the role of special purpose entities. The report also assesses the strengths and weaknesses of the company, develops a hypothesis, and references relevant academic sources. The assignment provides a comprehensive overview of the accounting and auditing failures that led to the collapse of Madoff's investment firm, emphasizing the need for improved regulations and ethical practices in the financial sector.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary issues in accounting
Research proposal
Student name
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CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Introduction....................................................................................................................2
Discussion......................................................................................................................2
Practical motivation...................................................................................................2
Theoretical motivation...............................................................................................3
Hypothesis..................................................................................................................6
References......................................................................................................................8
appndix.........................................................................................................................10

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CONTEMPORARY ISSUES IN ACCOUNTING
Introduction
The study report deals with the scandals of Burney Madoff, which is one of the most
significant investment company in Australia. This company had faced the biggest scandal in
auditing in the year 2003. The study assignment gives a clear view of the different aspects
like practical and theoretical motivation techniques. Further the study also gives a brief over
the literature review related to the relation between practical and theoretical aspects of the
scandal of Burney Madoff Company. The overall strength and weakness of the research area
have also conducted. Hence the critical hypothesis is related to the case study overall.
Discussion
Practical motivation
The Burney Madoff scandal had been one of the biggest Ponzi scams that the world
had ever seen. The company had cheated the investors by fraudulently collecting all the
money from them and commencing the auditing by not only meeting the basic auditing
standards. Since the verification is a serious issue, therefore the companies look to deal with
this aspect by scrutinising the mere mistakes. However, this issue had clinically affected the
accountants, shareholders and investors (Lando 2016.). These are as follows-
Corporate governing body
The corporate governing body is responsible for the good and bad of the company.
However the management had to take some responsive actions to prevent the fraudulence.
The company had manipulated the investors’ money unethically and used them for their
purpose (Karpoff et al.2014.).

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CONTEMPORARY ISSUES IN ACCOUNTING
Investors
The investors are also considered as an essential area to deal . Specifically, some
investors had claimed that they had been wiped out. Moreover the banking institutions HSBC
holdings PLC Britain, royal bank of Scotland group and the other subsidiary companies had
also faced the same issue related to the scam. Hence this scam had increased the overall
market risk, and the new investors had to think twice before investing (Antipova 2016.).
Accountants and auditors
The auditing is considered as part and parcel of the company. Hence at the time of
verification it is essential that the companies meet the rules and regulations of ASA. On the
other the owner of the Ponzi shop, as well as the CEO of the company Mr Burney, had also
found some wrong way to solve the problem overall. Since this issue is directly related to the
investors, thus it is an important area to be highlighted.
Theoretical motivation
The theoretical motivation is a technique which deals with different factors relating to
the scandal of the Burney Madoff. Basically the company had unethically used the investors’
money for meeting their purpose. The process is related to the fact of the auditor
misrepresentation. Hence with certain effect the company had lost all their plots, and
apparently the share prices have gone down. Therefore this case had a broad view of the
company accountants, shareholders and investors. The share market had also faced a
significant fall from their new status. Moreover the company investors had also withdrawn all
the money invested in the shares, debentures and bonds. However the company auditors did
not duly audit the financial reports generated. Thus on the immediate effect the company had
forced to shut down the business, many employees had lost their jobs, the company had faced
a considerable amount of financial loss. Therefore the accounting and auditing standard of

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CONTEMPORARY ISSUES IN ACCOUNTING
Australia had tried to implement new auditing techniques to support the crisis (.Fisher et al.
2016)
Literature review
The research had identified the proper employment of the appropriate personality
relating to the foundation of the company through the help of both the profiting and non-
profiting company. Hence the attributable theory had identified three basic dimensions which
can relate to the judgements regarding the practical responsibility of the company associated
with the controlling, stability and effective decision making concept. Hence the three scopes
can have a psychological functioning as well as the effective secondary process which have
occurred within the company or are related to different factors or assessments outside the
company. Hence this changed is self- reclaimed (Cullinane 2014).
Again the scandal is also related to two types of controlling technique. The internal
control is related to the management process, and the external factors are related to the
company shareholders, investors and the other fundamental areas related to the scam of
Burney Madoff. Here, in this case, the researcher had looked to find those areas which had
led the business down. These issues are as follows-
Too good to be true
The Madoff firm had offered investment seek which had comprised of low risk and
high return value. Hence this concept is very much outdated. Investors had predicted the fall
when they see that the return percentage provided by this company is much higher than other
companies. But in the case of Madoff, the company had given their clients a staggering rate
of 12 to 13 per cent return which was quite unethical. Hence it had created some doubt and
concern to the advisors, hedge funds and other potential investors.

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CONTEMPORARY ISSUES IN ACCOUNTING
Ponzi scheme
Since it was a Ponzi shop, hence it had come up with an effective plan. This scheme
had generated an unmanageable outline of purchases and reclamations. The balance sheet
graphics below had helped to illustrate what a Ponzi shop could look like, and the investors
had understood the same later on. Thus this scheme had not been considered by the investors
in a proper note overall.
It is not always that the Ponzi schemes are still in deep trouble. But the cycle stops
when the outlines ruin when basically the projects are exceeding the value of the assets.
Hence this scheme of Ponzi had ruined the business of the Burney Madoff. On the recent
study it is seen that the economic degradation had generated the fundamental failure to the
firm and they had paid the consequences. Hence the balance sheet had degraded and
eventually slipped to the negative territory. The schemes had faced inevitable consequences,
and this had put absolute pressure on the company investors in the form of investments at a
rapid rate.
Therefore this was the main reasons why the company had to stop their business. In a
nutshell the cheat fund type schemes and irresponsible auditing had forced the company to
stop the activity.
Special purpose entity
The company had borrowed a large amount of money from the investors who used to
invest in the shares or buy debenture of the company. On the other hand the company had
also given mortgage loan facility to the investors or to meet the debt obligations of the
investors. Thus this process had burdened a large amount of money from the company
investors and did not repay it for long. Therefore this burden had caused the investors to
withdraw all the cash at the time of crisis. Moreover the company had also shown excessive

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CONTEMPORARY ISSUES IN ACCOUNTING
amount of asset allocation in the financial year and not stating the same correctly. Hence this
was another reason why the company had to close down the business. Thus the strength and
weakness of the company had also been discussed over here. These are as follows-
Strength
Being a Ponzi shop the company’s success was highly dependent on the investment
criteria and the value delivery to the clients. However the useful market studies had helped
the company to meet the customer needs and provide them the best portfolio support to make
the right amount of profitability.
Weakness
The main weakness of the company was related to the failure in the management
process. The company had wanted to make more profits in short time. On the other hand the
company had failed to deliver the promise to the investors accurately. The company board of
directors had not monitored the process correctly as well as the management had developed
new business techniques, hence this process had been overlooked by the company.
Hypothesis
There are two kinds of explanation which had discussed while describing the business
procedure of the company. The null hypothesis is the area which did not effectively generate
actual outcome of the discussion. On the other hand the alternative hypothesis had always
described the positive and negative regions related to the issue. Hence it is seen that the
government had implemented many new rules and regulations towards the business
perspectives. Again the government had also looked to provide individual attention to the
process to effectively perform the auditing techniques (Kachelmeier et al.2014)

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CONTEMPORARY ISSUES IN ACCOUNTING
Apart from these positive areas, there are some negative areas which had also highlighted in
this aspect. Due to commitment of inevitable mistakes the company had lost all the business.
Hence the potential investors, buyers, stakeholders and the other authorised parties had gone
against the business policies implemented by the company. Owing to this fall out the
company had severely hurt and lost all their market effectively. Secondly another major
drawback of the company was to lose all their potential investors. It had severely affected the
overall share price of the company. Therefore Burney Madoff had no choice but to wipe out
the business.

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CONTEMPORARY ISSUES IN ACCOUNTING
References
Abeles, G.E., 2014. Method for detecting identity misrepresentation in fraudulent tax returns.
U.S. Patent Application 13/971,142.
Antipova, T., 2016. Auditing for financial reporting. In Global Encyclopedia of Public
Administration, Public Policy, and Governance. Springer.
Cullinane, B., 2014. Assessing Irving Picard's Writ of Certiorari in Picard v. JP Morgan
Chase: Another Chapter in the Saga of Bernie Madoff and His Impact on the Securities
Industry. J. Bus. Entrepreneurship & L., 8, p.287.
Fisher, I.E., Garnsey, M.R. and Hughes, M.E., 2016. Natural language processing in
accounting, auditing and finance: A synthesis of the literature with a roadmap for future
research. Intelligent Systems in Accounting, Finance and Management, 23(3), pp.157-214.
Kachelmeier, S.J., Majors, T. and Williamson, M.G., 2014. Does intent modify risk-based
auditing?. The Accounting Review, 89(6), pp.2181-2201.
Kachelmeier, S.J., Majors, T. and Williamson, M.G., 2014. Does intent modify risk-based
auditing?. The Accounting Review, 89(6), pp.2181-2201.
Karpoff, J.M., Lee, D.S. and Martin, G.S., 2014. The consequences to managers for financial
misrepresentation. In Accounting and Regulation (pp. 339-375). Springer, New York, NY.
Kumar, R. and Sharma, V., 2015. Auditing: Principles and practice. PHI Learning Pvt. Ltd.
Lando, H., 2016. Optimal rules of negligent misrepresentation in insurance contract
law. International Review of Law and Economics, 46, pp.70-77.

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CONTEMPORARY ISSUES IN ACCOUNTING
Peter, Z., Masoyi, A.D., Ernest, E.I. and Gabriel, A.O., 2014. Application of Forensic
Auditing in Reducing Fraud Cases in Nigeria Money Deposit Banks. Global Journal of
Management And Business Research.

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CONTEMPORARY ISSUES IN ACCOUNTING
Appendix
Author Dat
e
Title Journ
al
Type of
Paper
(Theoretic
al or
Empirical
)
If
empiric
al,
research
method
and
sample
If
practical,
dependent
and
independe
nt
variables
100 word
summary of
contribution to
the research
question
Lando, H., 201
6
Optimal rules of
negligent
misrepresentatio
n in insurance
contract
law. Internationa
l Review of Law
and
Economics, 46,
pp.70-77.
yes theoretica
l
n/a n/a The study topic
had described
the
auditor
misrepresentati
on concept
related
To the Burney
Madoff.
Company. the
basic objective
is related to the
primary
discursive areas
of the business
as well as what
had gone
wrong by the

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CONTEMPORARY ISSUES IN ACCOUNTING
company which
had
Forced the
company to
lose all the
business plot at
the same time.
Further the
study had
discussed the
basic ethical
issues related to
the process.
Abeles,
G.E.,
201
4
Method for
detecting identity
misrepresentatio
n in fraudulent
tax returns. U.S.
Patent
Application
13/971,142.
no theoretica
l
n/a n/a This article
discusses the
fraud activities
related to the
refund of
payments,
including the
overall key
information
related to the
business
activity. Hence
this aspect is
also related to
the auditor
misconception
and data
contradiction.
Antipova,
T.,
201
6
Auditing for
financial
reporting.
In Global
Encyclopedia of
Public
Administration,
Public Policy,
and Governance.
Springer.
no theoretica
l
n/a n/a This article
discusses the
presentation of
the financial
data,
accompanying
the notes as
well as
implementing
the key
Economic areas
related to the
auditor
misrepresentati
on. Hence it
fairly
implements all
the aspects
related